RAM RATNA- A POTENTIAL MULTIBAGGER

ABOUT:-

            RAM RATNA company is engaged in manufacturing of enameled copper winding wires.

Its products include modified polyester copper wires, polyesterimide wires, etc.

BRIEF ABOUT COMPANY:-

           The company was originally incorporated as Ram Ratna Winding Wires Pvt. Limited on July 21, 1992. Subsequently the company was converted from private limited to public limited and changed its name to Ram Ratna Wires Ltd.

           The company is engaged in manufacturing of enamelled copper winding wires. Its products include modified polyester copper wires, polyesterimide wires, polyurethane self solderable wires and dual coated wires.

           A leading conglomerate in the electrical industry and a global manufacturer, they collectively engineer every electrical need of a modern society through the four business lines they operate in:

                        i.            Wires and Cables

                        ii.            Winding Wires

                        iii.            Electrical Consumer Durables and Accessories.

                        iv.            Electro-Mechanical Multilevel Car Park Solutions

           Their approach to ingenious simplicity is built into all their products that are made available through distributors and retailers across 73 countries, globally.

PRODUCTS OFFERED BY THE COMPANY:-

           RRWL’s products are utilized in various electrical equipments such as transformers, cables, transmission lines, switchgears, capacitors etc. Its product portfolio comprises sixteen products that broadly fall into five categories:

                          i.          Enameled copper winding wires(ECW)

                          ii.         Enameled copper strips (ECS)

                          iii.       Submersible winding wire (SWW)

                          iv.       Bare copper strips (BCS)

                          v.         Enameled aluminum wire (EAW)

           Few other products (amongst 16) are: Modified polyester copper wires; Polyesterimide wires; Polyurethane self-solder-able wires; Dual coated wires; fibre glass covered strip; enameled fibre glass covered and varnished strips, etc. Its end products meet Indian and international standards including IS, IEC, JS and NEMA.

           The Company operates in the transmission and distribution (T&D) industry and is the first choice for large original equipment manufacturers (OEMs) and top electrical companies in India as well as MNCs. Through its dealer-market nationwide, it also caters to thousands of small manufacturing and repairing units of electrical equipments in the country. Thus, it has an equal share of the organized and unorganized market spread across the country. RRWL continues to develop value added products like corona resistant wires and triple insulated wires as per customer requirements keeping pace with developments across the world.

SHAREHOLDING PATTERN:-

             Promoters as on Sept’16 are holding 73% of the company’s shares. The company is having no pledged shares! The main promoter, RAM RATNA RESEARCH & HOLDINGS PRIVATE LTD.  holds 15.45% of the company’s shares. Highest holder among the public shareholders is the LATA SHYAM PARWANEY, holding 2.9% of the company’s shares.  DIIs holding stand at 0.02% (2DII holders)as of sept16.

            Another interesting info, Promoters of Ram Ratna Wires own 73% of the company. Another 10% is owned by anchor investors. So only 17% is owned by around 4000 shareholders.

Financials and future prospects:-

FINANCIALS:-

             The company this financial year posted an EPS of 4.39 vs 4.47 in FY 2014-15, thus posting negative growth for this year. The company is having a good financial trend reporting fab Q2, more than 250% rise in EPS YoY

             Company’s operating profit per share is Rs15.69 against 15.67. The OPM, CPM & NPM stands at 4.73%, 2.36%, 1.32% against 4.61%, 2.21% and 1.32%. The ROCE decreased to 15.04% against 17% while RONW decreased to12.94% vs 14.83%.

             Company though is debt-ridden, but having enough cash flow to pay interest on the debt. Company has been maintaining a healthy dividend payout.

             ABOUT RAW MATERIALS (expectations): RRWL will benefit from falling copper prices and weak USD as copper is the Company’s main raw material of which 32.74% of the total consumption is imported along with state-of-the-art machinery for quality production.

FUTURE PROSPECTS AND EXPECTATIONS:-

The modernization and expansion plan as envisaged by the  Company at its plants for increasing the production capacity, widening the product range and improving production processes, is a continuous one and is being taken from time to time as required.

SECTOR outlook:-

            The overall performance of the Industry has been far from satisfactory in the past two years. The demand has been sluggish with the Electrical Equipment Manufacturing Sector not having adequate business from Power and infrastructure projects. The world seems to be now recovering from the turmoil of past two years. Amongst the developing economies, India has emerged as among the most promising prospects for the future. The icing on the cake has been the recent Union Budget which is hugely focused on infrastructure development nationwide. Naturally, they look forward to being a significant contributor in this segment.

            The demand for winding wire is directly linked with the growth in power sector. The Union budget for the financial year 2016-2017 focus on accelerated growth within power sector with increased outlay of the tune of ` 79,884 crs, apart from 3,000 crs allocated to the nuclear power generation. This combined with programs like “Make in India” and “Skill India” will give a big boost to domestic production of Electrical & electronic equipment and hence greater demand for winding wires is expected.

            As per the projection by Union Power Ministry, by the year 2020, every home in the country will be electrified. This coupled with the success of UDAY (Ujwal DISCOM Assurance Yojana) scheme of the Energy & Power ministry to strengthen the working of State electricity boards to supply electricity to its consumers will increase per capita consumption of electricity in India. The Union Budget 2016-2017, have given prominence to Agriculture and Rural sector, apart from infrastructural development. All these factors will boost the demand for Electrical equipment for Industry and domestic consumption in the vast rural sector which in turn will result in huge demand for winding wires.

             On the export side, Indian Electrical equipment Industry is quite matured and competent as per world standards, having export markets in countries like, USA, Germany, UAE, Saudi Arabia, France, UK, Nigeria, Kenya and Brazil etc. This sector is backed by diversified, matured and strong manufacturing base either directly or through foreign collaboration with proven performance in rugged design of equipment to meet the stringent international Standards. All these factors will contribute to the demand for best quality winding wires. The very fact that, Salasar Copper (Unit-1) of this company is credited with maximum no. of International certifications, such as ISO 9001: 2008; ISO 14001:2004; ISO 50001: 2011; OHSAS 18001:2007 speaks of its quality, reliability and competitiveness which will definitely help demand for the company’s products.

Technical:-

 RAM RATNA is technically bullish. It has crossed its life-time resistance at 75-77 zones after creating near triple-top in that zone. Right now Ram ratna is trading at its lifetime high. The company is above all EMAs and SMAs thus showing its bullishness. The price is going above Bollinger bands, so it might create a base at 86-92zones before another up-move.

SWEET SPOTS:-

1)    Company has been maintaining a healthy dividend payout.

2)    The company’s operating cash flow is positive all the time, thus maintaining its stability and the ability to pay interest on its debt and also having huge cash reserves for further expansion.

3)    Increasing cash reserves on low equity; can issue bonus anytime.

4)    Company has plans for future expansion.

5)    No doubt in promoters’ integrity. The founder of the company himself has raised from the earth to sky, he will try his level best to push its way further.

6)    Modi Govt. Has vast Interest in infrastructure sector, where they have already focused their main attention on this sector in their last budget; further focus on this sector will be a boon for this company. This company already has a wide customer base.

7)    Since last 3 quarters the company has done a net profit of 4+crs, that too on the back of a sluggish year. There is quite good scope that annual EPS for the current FY could well double compare to last FY.

8)    Expecting good Q3 results.

9)    Expecting this union budget to be positive for the infrastructure sector thus increasing the company’s wire demand.

       10) Though the last year balance sheet indicates a debt of 100+ crores, long term                 debt here stands at only 12 - 15% of that. Rest all could be working capital. 

       11) Mcap to sales ratio is 0.29 thus giving ample of opportunity of appreciation.

Hot spots:-

             1)     In the winding wire business, the global demand and supply of copper and its                prices plays a vital role and could significantly affect the Company’s turnover.

             2)     Company has a low return on equity below 15% for last 3 years.

             3)     Highly fluctuating price of copper, which is the principle input to the winding                wire Industry, is a serious concern.

             4)     Delay in infra spending by the government.

             5)     Currency fluctuations could affect the results of operations.

             6)    Margins are low for the company.

             7)     The company couldn't capitalize on falling copper prices as the EBITDA                       margins are stable in the level of 4%-4.7%

             8)    The receivables are very high approx. 55% of the company’s total assets.

MY TAKE:-

               The company is expected to do well in coming years. The writer of this blog reco it at 76, has TGT1:250, TGT2: 470-500 in next 30-40months.

UPDATE 25th July 2018 (CMP 144):-
RAMRATNAWIRES met our 1st tgt in less than 18months. HOLD is my call!

Disc:- All the info are based on the writer's own research/gathered from public domains. The writer of this Blog is neither any advisor nor related to any brokerage houses!! The writer might be himself invested in the stock after his own research so the views might be biased. One must do their own research before investing. The writer of this blog won't be held responsible for any of your profit/loss in your investment/trading career!